Wealthy say they're struggling too

BY JENNI MCMANUS

Finding the Great Recession tough going? Spare a thought for the rich. They're doing it tough in posh Parnell and leafy Fendalton.

If you're struggling on the $50,000 average wage, a $500,000 salary is a small fortune. But Kiwi executives claim it's not enough to live on as the recession bites.

That's been spelt out by two well-heeled women, both socialites and professionals who spoke to the Sunday Star-Times on the condition their identities weren't revealed. They've given us some insight into the average annual costs for a typical, well-off family of four.

Let's start with the mortgage, the biggest drain on your money no matter how much you earn.

For the average executive: $117,000 a year based on a $1.5 million mortgage on a house valued at $2m. Then there's $77,000 for a $750,000 mortgage on the $1m beach house.

Yes, the wealthy are as highly mortgaged as the rest of us; they just buy flasher houses and pay bigger mortgages. And no matter whether the salary is $100,000 or $500,000, the credit cards are usually maxed to the hilt.

Then come the kids. Private school: $20,000 per student (so $40,000 for both kids and $60,000 if they're boarding). You still need a nanny at $45,000 for after-school care and sporting activities, and to handle the kids' laundry, ironing and dinner preparation (cleaners typically refuse to do kids' ironing while nannies refuse to clean).

We're already at $299,000 and we haven't yet thought about taxes, the boat, the vacations in Fiji and Aspen, the Lamborghini and the sets of sheets sent out twice a week for washing, starching and pressing ($20 a pop). Nor the entertainment bills, domestic help and mundane expenditure such as food and utilities.

Add on staff (chef, cleaner, gardener, baby sitter, flowers, personal trainer, kids' tutoring) of about $40,000 a year.

Then comes the obligatory botox and fillers ($9000), cosmetics, waxing, hair care, manicures, facials, fake tans and massages.

Clothing is another big expense. At this income level, the average woman would spend about $30,000 a year, plus $15,000 for her partner and $15,000 between the two kids.

Running and maintenance costs for a "modest" $75,000 personal vehicle for the non-working partner are $14,000 a year and a marina berth at Westhaven, Auckland, will set you back $28,000.

Throw in the mundane, like power ($12,000) those mansions get drafty rates ($6700), food ($23,400, based on $450 a week for a family of four). Grand total: $513,220.

You see then, how stretched executive salaries are becoming and why they're trying to cut back. Note our survey doesn't include telephone, mobile and internet connections, or medical and dental care, as most are funded (at least partly) through work perks. It also excludes taxes as most people on this rung of the social ladder use accountants to dodge them.

We've also excluded vacation costs as this has been the first luxury to go. It's easy to see why. A 14-day ski trip to a Canadian resort like Whistler will set you back $60,000; a week at Vomo, a top-level Fiji resort, is about $16,000.

We haven't attempted to cost booze and entertainment. With rich people the sky's the limit, but we're told there has been some serious culling here. In short, times have become hard for many at the top of the social and economic scale.

"It's a stretch," says one of our sources. "And for some, like lawyers and accountants who've been pushed to live up to the lifestyle even when times were good, things have been very tough since the beginning of this year."

Not that anybody admits it. Instead, says this woman, you'll hear of couples selling their beach house "because the kids have got bored with it" or withdrawing them from school "because they've got enough Cambridge credits and need a gap year".

Less popular, too, are the flashy charity balls, where wealthy men loudly outbid each other at big public auctions. There are fewer social dinners with wives at expensive restaurants. "People are much more likely now to invite you to a barbecue in their backyard," one of our sources says. "The week in Fiji is being replaced by the long weekend in Taupo."

What matters, she says, is not the story but how you dress it up. "You never say you can't afford something. But instead of having your roots coloured every six weeks, you might now get them done every eight weeks. This recession is changing the way we do things. We're living differently."

Another sign is wealthy households fine-tuning their household spending and home running costs. "It's no longer Perrier but NZ Natural. Before [the recession] we never gave it a thought."

This woman says wealthy families are also applying their minds to things like their personal phone bills "that in the past were just too hard to understand". She says her family has restructured its mobile call scheme as it realised it was paying three times as much as necessary.

She has also noticed some of her more myopic friends wearing their glasses rather than forking out for disposable contact lenses.

The change is also multi-generational. Families where parents have, until now, subsidised the beach house or private school fees have also fallen on hard times. Some have been victims of finance companies or the likes of Blue Chip. Others are getting significantly lower interest rates on their bank deposits. Family trusts in some cases have lost vast amounts of money. Even families which still have jobs are experiencing widely different financial situations.

So private schools get the chop and so, too, the beach house if anyone can be persuaded to buy it.

"Anecdotally, I hear that every second bach in places like Omaha is up for sale but you won't see any signs outside," says one of the women. "Instead you'll hear people say at dinner parties that if someone happened to come along with a shitload of money, then they'd probably be tempted to sell. What they don't tell you and what the reality is is that they're completely in the crap."

So why bother to compete? Why not downsize to Mt Albert, send your kids to a state school and buy a bus ticket?

Auckland is tribal. Much of your professional success depends on where you live, how you live and who you know. As Sex and the City author Candace Bushnell, said recently: "If you are in a culture where spending a lot of money is a sign of success, it's like the same thing that goes back to high school peer pressure. It's about fitting in."

Footnote: It is not known how many Kiwis earn $500,000 a year. Data from the 2006 Census shows roughly 3% of the working population, or 105,525 people, said they earnt $100,001 or more, the highest band.

- © Fairfax NZ News